Massachusetts program helps banks lend to local businesses

The Republican | John SuchockiThe Fernandez Family Restaurant on High Street in Holyoke, with Ivelis Fernandez-Almodovar, owners Rafael and Ada Fernandez, Jacqueline Fernandez and Ada Fernandez-Rodriguez.

SPRINGFIELD — The family behind Fernandez Family Restaurant in Holyoke is expanding, adding a banquet hall at the former Adelphia Restaurant in South Hadley and creating 12 to 15 new jobs, with the help of the state treasurer’s Small Business Banking Partnership.

The Fernandez family borrowed $450,000 from Chicopee Savings Bank to open Elegancia Banquet Event and Meeting Room. But it is state money, deposited in Chicopee Savings and 49 other community banks around the state by the state Treasurer’s Office in an effort to stimulate small-business lending and the larger economy.

“This is about rewarding the heroes of the recession, community banks and small business,” State Treasurer Steven Grossman said during a recent meeting with The Republican’s Editorial Board. “Particularly because those will be the ones who will supply the Little League uniforms and the batting helmets. This is how you build the local economy.”

Ada Fernandez-Rodriguez, president of the restaurant company, said she’s looking forward to be a part of South Hadley. The banquet house will operate in addition to the 25-year-old Fernandez Family Restaurant on High Street in Holyoke. The Fernandez family just closed on the real estate in South Hadley and renovations have yet to begin.

Grossman was in Springfield last week to announce that Hampden Bank is now the 50th bank in the state to participate in the program. Since 2011, Grossman’s office has deposited $278 million with 50 local banks, money that had been deposited with large savings institutions, often overseas.

Banks pay a floating interest rate of about a quarter of one percent. In return, they promise to loan the money out to small businesses. The small businesses must be credit worthy and Grossman makes no demands.

He said the program focuses on businesses owned by women and minorities.

“But there are no quotas,” he said.

Grossman said the program also focuses on the state’s Gateway Cities, former manufacturing centers like Springfield and Holyoke that have since fallen on hard times.

By the state’s reckoning, participating banks say they have used the program to help swing more than 2,500 loans totaling $365 million in state and other funds.

William J. Wagner , president of Chicopee Savings Bank, said the state program helps banks lock in a low cost for the money they will loan out. He also found Grossman’s program attractive because he agrees with it as public policy.

“I just think it makes sense for the State of Massachusetts to put its money in local banks so they can loan it out, rather than putting it with a large money center bank that is going to put it overseas,” he said.

Luke D. Kettles, senior vice president and chief lending officer at Hampden Bank, said the bank has added staff as part of a wider effort to make more small-business loans. Larger banks often avoid small-business lending because it takes a lot of staff time to work with lenders and check their creditworthiness. Some larger banks don’t see fit to expend that energy on relatively small deals.

But both Kettles and Wagner see increased demand on the part of small businesses looking to expand.

“We had a very good year this year,” Wagner said. “But it definitely could be better. There are a lot of people standing on the sidelines. I think they are waiting for more consistent public policy.”